Broker: Insurer biased toward branches

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Are mortgage insurers playing favourites?

Yes, they are, according to some mortgage brokers arguing that preferential treatment is increasingly extended to the banks – and at the expense of broker reputations.

“It’s not only making me lose clients, it’s also making me look stupid,” said Derek Rowley, a broker with Real Mortgage Associates, who recently had three clients turned down by an insurer. “When the three returned to the same insurer with loans they got from the banks, that insurer approved all three deals.”

That kind of discrepancy has incensed broker in several markets, alleging mortgage insurers are more likely to approve deals submitted by bank road rep and branches.

“What gives?” asks Rowley. “They were basically the same deals. It was the same people, the same circumstances, only this time the loans were from the banks.

“In my opinion, insurers are showing favouritism towards the banks.”

Brokers like Rowley are worried that if left unchallenged any bias toward the banks will ultimately challenge the industry’s reputation at a time when getting qualified for mortgages has become more complex.

“Eventually if I get enough of these, word will get around that I didn’t get this client’s loan insured, but the banks did,” he told MortgageBrokerNews.ca. “That will (hurt) repeat and referral business.”
Rowley is now calling for a formal mechanism to ensure insurers view applications under the same standards, regardless of the originator.

The situation echoes the predicament of other brokers who accuse broker banks of turning down deals later approved when submitted by road reps.

“It’s happened with three deals in the last two months – two with one big bank that uses brokers and the other with another of the big banks using the broker channel,” Rohit Bagga, an Edmonton agent with Invis, told MortgageBrokersNews.ca late last year.

All three were the kind of A deals Rowley points to, although Bagga’s were challenged by proof of income and relying, at least in part, on foreign funds, he said.

Each was rejected based on those challenges and, at Bagga’s own urging, his clients then submitted those same deals – with the same terms – to the same lenders, but through a bank rep. The outcome was remarkably different, despite the income and other challenges attached to those apps.

“I’m sorry to say that the banks seem to have one set of rules for deals submitted by brokers and another set of rules for deals submitted by mobile mortgage specialists,” said Bagga.
 

  • Rebecca Awram, Home n Work Mortgages Inc. on 2012-08-04 2:31:01 AM

    I agree! This has happened to me too! In fact, on one deal the beacons were so low (under 580) that my first reaction is that the clients were lying to me :) I didn't see how they got insured. Other similar situations not quite as dramatic. It would be illuminating to see some type of "audit" of files re-submitted and approved

  • Max Cafissi- Broker on 2012-08-04 2:37:24 AM

    This has been going on for years. As a Broker, I tell clients that if I can't get you approved, talk to one of the Bank Specialists, they'll do anything to make a Commission. Yet, it's funny, it is we, the Brokers, that in some cases have the tarnished reputations with the Public and the Media.

    Something even worse is the fact that some of the Alternative Lenders that also deal with the Banks' " non-conforming " division, seem to favour deals when they are submitted through that Bank's channel. I have personally had deals declined by a "B" Lender and found out later that it was approved when submitted by the Bank's Alternative Lending Dept. I've had many cases where the LTV was increased, in relation to my prior submission, when it was sent in again by a Bank Specialist. Is it any wonder the FEDs are tightening Lending rules. I suspect that either the FEDs or the Banks themselves have done an internal Credit Audit and now realize what a perilous position they are in. I'm sure, sooner or later, we as Mortgage Brokers will get the majority of the blame for this.

  • Nicholas Hamblin - Ideal Mortgage Inc Halifax NS. on 2012-08-04 3:18:22 AM

    Yes , we have seen this happen as well and in fact if we have value or income issues we will use chartered banks vs monoline lenders with better results, the playing field is definately tilted in favor of the banks branches and their road reps !

  • Kenzie MacDermid on 2012-08-04 3:45:03 AM

    Banks own the government, government owns the insurers is just the beggining. The bias towards the banks and elimination of brokers is the objective. Blame it on the explosion of brokers, and the adverstising of low rates for high volumme practice. The banks dont like loosing money on mortgages lost to brokers, and deep discounting, also a result of brokers. You had to expect the backlash sooner or later. Brokers created this nightmare by marketing rate vs. service and expertise.

  • George Mazurek, Mgr, CMC Automated Mortgage Corp on 2012-08-04 8:55:02 AM

    In the 1970's, I remember being able as a mortgage broker, to talk to CMHC directly at the Vancouver office on a pending file sent through a lender when insurance was initially declined. The insurance officer would work with me to provide additional docs to provide the proof needed to receive insurance. If Emili would open up through a tracking system to allow brokers that originated files, to communicate with CMHC and the lender underwriter directly, I think we would have more success in insured applications.

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