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.