Broker not satisfied with FICOM explanation

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With the consultation process for FICOM’s proposed Form 10 disclosure changes winding down, one broker – and former banker – argues the regulator hasn’t provided a sufficient explanation as to why exactly it feels the change is necessary.

“We need to determine why FICOM is after mortgage broker's commission disclosure. FICOM never disclosed the real reasons behind their actions,” Walid Hammami, a broker with Dominion Lending Centres, told “If they want to protect the consumer they should then be unbiased.”

FICOM is putting forth a new interpretation of regulation Form 10, which would require mortgage documents to explicitly state how much brokers are compensated.

And, in a letter shared with in early January, FICOM explains its reason for targeting broker commissions.

“(The broker) industry understands that lender compensation can influence a mortgage broker's advice to a consumer. That can result in advice that does not align with the consumer's best interests,” the letter reads. “Conflict of interest disclosure reinforces the relationship of trust between consumers and mortgage brokers, and reduces the risk that consumers receive compromised advice. However, for disclosure to be effective it must be clear and easy for consumers to understand.”

Still, Hammami argues that explanation isn’t adequate.

“FICOM is afraid that the broker is redirecting the deal for the lender who pays most, and that could be to the disadvantage of the client. But what do banks do when they sell you a Visa or an investment?” Hammami said. “Do they direct you to the product where they make the least money? Do they sell you the Visa with fees or without fees? Do they sell GICs or mutual funds?”

FICOM obviously does not regulate the banks. But many industry players have already pointed to the fact that the FICOM change could benefit those lenders.

If, in fact, broker disclosure does influence clients to choose a bank over the broke channel, the argument could be made that that choice could lead to even more biased advice. 

“I remember one VP in a bank I worked for threatening financial planners to downgrade them to regular account manager if they don't sell more Mutual funds,” Hammami said. “Same goes for Visa cards with or without fees.”

The deadline to submit feedback to FICOM is February 20. 

When asked what sort of feedback the regulator has been given so far, it refused to go into specifics.

“As you noted, we’re still encouraging mortgage brokers to send in their submissions but are not at liberty to share any of the submissions publicly at this point,” Greg Dickson, communications specialist for FICOM, wrote in an email to
  • audrey wamboldt on 2016-01-28 9:32:31 AM

    So, I still fail to understand why disclosing a broker's compensation reflects better advise to the consumer? There is nothing to compare it to- simply by saying I am earning $X- it doesn't put it in any context for the consumer. How does the consumer know by the broker's finders fee if there are lenders who pay less ff but offer more benefits or a lower rate to the consumer? If- we are charging a fee over and above the lender's comp- then we should have to always acknowledge that and get the agreement in writing; if we are paid by the lender only- then we acknowledge we are being compensated by their choice of lender in writing to our clients. Any fee over and above that should be spelled out completely and disclosed to the penny to the borrower.

  • Dave on 2016-01-28 9:42:02 AM

    @Audrey don't understand it because FICOM has no clue what they are doing....Happy 2016

  • Guy on 2016-01-28 10:00:00 AM

    I feel this is another step to reduce mortgage agents finders fee. I feel if my client knows I am earning between 80-120bps on their deal, they want a portion of that or force me to buy the rate down or they threaten to go the branch. Most of my mortgages are moving towards Alt A and private. I no longer can compete with the banks since they are offering up to $800 towards appraisal and closing cost, offer lower rates than to the broker level and work on TDS ratio of up to 50% and drop debts to make the deal work. The more I hear what banks do, it sickens my stomach and I know why so many of my fellow agents are leaving the broker side and joining banks because it is easier to fund deals since rules do not apply. At least with sub prime, I don't have to compete with crap like this.

  • Tony Piattelli on 2016-01-28 10:00:59 AM

    Let's get something straight right now, our ability to provide advice to clients as to which mortgage option to take has been negatively impacted by the changes in mortgage rules which effectively puts most of our clients into 5 year fixed rate mortgages given the MYTH, that Variable Rate/Adjustable Rate mortgages are more risky, so they are qualified using a higher rate. This also applies to anyone who wants to take a term less than 4 years to match their financing objectives. FICOM would do better to fight against these rule changes which create this imbalance and influence real change. Since this objective has been in the works, I've asked my new clients whether they would want to know how much I make on their deal, and none of them care as they aren't paying it. Focus on real change that actually has implications for moving the industry forward instead of building barriers. Look at the big picture.

  • Mark Cashin on 2016-01-28 10:05:46 AM

    So if I understand "bureaucrat" speak... if a Broker has 20, 40, 90 + institutions to offer with lets say 10 mortgage products each to align with their customers needs the simple fact of disclosing the "Finders Fee" (because we already disclose broker fees if applicable) will automatically default the customer to the best product offering?

    And when I say best product we are talking about lowest Finders Fee. RIGHT!

    No longer do Brokers need to do a needs analysis for affordability, family budget, 1,2 5 10 year wealth strategy, the adverse affects of penalty clauses, early payment discussions and needs, restructure due to high consumer debt load, best loans for construction projects, etc, etc.

    It would almost be like , hmmm let me think...OH YEAH like working for a bank with one suite of products. Yeah that's it. No options just buy what we have because? No pressure selling from banks with there full disclosure and all.

    Perfect this will save a lot of time for Brokers.
    Who knew such a simple step in the disclosure would guarantee the consumer a "better mortgage"

    Thank goodness we have people championing the best interest of the consumer.

    Just out of curiosity has anyone let them in on how bank employees are compensated or shall we say receive bonuses??
    The difference between floor rate and sell rate, insurance, credit cards, investments. Did we mention the amount of MONEY the bank lobby spends a year in Canada?

    I am not sure where exactly the "stupid idea" factory is located in Canada but that should be the first target to regulate!

  • B. Stephens on 2016-01-28 10:45:52 AM

    I place my deals based on service. Most clients want their financing done quickly and with the least amount of hoops to jump through. Clients could care less if I made 75bps or 110bps. If the product does not pay enough in respect to the amount of work involved I charge a broker fee and explain it up front to the client. I don't think this will influence deal placement to any large degree. I dont agree with the changes based on the fact that this is more an invasion of privacy. What industry do you have to disclose your income to the world? This is a typical bureaucratic hair brain idea to fix a problem that does not exist. It is biased and if implemented should be done so across the financial board. Banks would be include in all the same rules and regulations that brokers are if these people truely had the consumers interests at heart.....

  • Debbie on 2016-01-28 11:08:06 AM

    I agree there is nothing in the clients best interest at stake here by disclosing the commission paid to the broker. So are we to outline every lender's commission along with rate for the client to then make their own decision on which lender is best for them after seeing what we make from each company?
    How many times do I have clients that have been to a bank and not offered any type of discounted rate until the bank finds out they have been to a broker. Why did they not offer the lowest rate possible at the beginning. They would have been more than happy to have hoped the client wouldn't know any better and paid the higher rate. who is policing the banks? Not to mention is there any other sales/commission business out there that has to disclose this information?? why do car dealerships sell the same vehicle to different people for different prices? commission perhaps?? I always get my clients the best rate/mtg possible regardless of my commission. I got into this business to help people save money as I worked for banks for many years who were always out to make what they can off consumers forcing us to selling them products they didn't need to meet our targets.

  • Warren Ross on 2016-01-28 11:23:49 AM

    I think to protect the public, it requires more than disclosing our commissions. For example, the difference in prepayment penalties from one lender to another is way more significant than the extra 10bps we might get on a deal. So I'll agree to disclose my commissions if banks also agree to disclose that their prepayment penalties are higher than the monolines.

  • TimH on 2016-01-28 11:44:46 AM

    audrey wamboldt +1: there's no basis for comparison, so there's no real benefit to the consumer.

    Until the Banks (and Credit Unions, etc.) are required to disclose their profit margin on each mortgage, the only conceivable outcome will be less competition (for Banks).

  • Suz on 2016-01-28 12:05:42 PM

    Let me start by saying I will disclose my commissions all day long, because I will be placing my client in the RIGHT product for THEIR needs... I have written so much on my thoughts about how this is not going to protect the client how the regulators think it will, because if we place them in a product that pays us a little less, because the regulators make the public believe that is what we should do if we were a good broker... it is likely to be the one product that will bite the client in the butt at early payout or with restrictions that DO NOT MEET THE CLIENTS NEEDS. So out goes fiduciary responsibility to the client for not providing the BEST PRODUCT FOR THE INDIVIDUAL, if we are to be deemed to be doing a dis-service to the client by getting paid a higher fee, (on the right product) because it is the best choice for the client. Sure, they could have received a 5bps lower rate, and we get paid 20 bps less, BUT guess what, they told the broker they were thinking of selling mid term, so put them in a 5 year term that has the cheapest penalty to get out ( Why not put them in a 2, 3, 4 year or variable term you say?) Because they DON'T QUALIFY on the benchmark ! (another brilliant government move to ensure the lenders get their penalties on a 5 year). Ug I am so sick of this protect the client excuse that actually does the clients such a huge disservice (like reducing refis to 80% LTV - INCREASING the need for consumer debt!!! That decision back fired Badly, so lets make another crappy decision to "protect the client" that actually back fires. The regulators need to stop making the public think all brokers are crooks, by implementing this "trust" requirement ( which is essentially what it is without them saying that "word"). Good brokers, work with their clients to provide them with the very BEST options for them, not the BEST fee paid. The regulators don't have any faith in their own registered brokers, and are showing this distrust to the public. Great image to put out there for our industry. I don't care if I get paid $0 on a file as long as I have taken care of the clients needs ! That is the job, that is the bond that responsible brokers have and that is respected by their clients, bringing in referrals and future deals. Why do we keep having to defend ourselves for a job well done. Rant over ! and don't rip my comment apart this time with your opinions, because this is MY opinion only... Read it and take what you want out of it... I respect your opinion and do not tear your comments apart. Have a fantastic day !

  • Sharon on 2016-01-28 12:13:30 PM

    Don't ask FICOM for an explanation. They have no idea. When was the last time any of them met with us to explain anything. Face to face with the industry takes knowledge and confidence. industry leaders need both, FICOM has neither.

  • Evan on 2016-01-28 12:16:07 PM

    When are brokers going to stop comparing themselves to the bank? Here are a few key items to remember:

    1) Banks do NOT hold themselves out as being independent, looking out for the clients best interest first, etc.
    2) Broker tell the consumer that they work for them and NOT the banks, which is fundamentally, and legally, untrue. You work for the person that contracts you and pays you. The lender CONTRACTS brokers to source them business and they PAY the brokers a commission for doing so.
    3) ALL banks in Canada fully disclose their fees and income on ALL products. They do it when you obtain the product, they do it with monthly statements, and they do it when they release their quarterly reports – which are public record.
    4) Bank employees are just that EMPLOYEES. Commission or not they work for the bank and they do not hide that fact. They do not claim to work for the customer, and they are openly selling their EMPLOYERS products.

    Think that all brokers are unbiased and commission does not factor into how they do business? Really? OK then explain why brokers move a client who wants to advance $ to a new lender and do not just do a top up, or extend and blend? Wait… could it be because if they do the top up/extend and blend they only get paid on the NEW money? Move it to a new lender and VOILA! Full commission!!! Who cares if the client pays a penalty… right? (Did you know that many banks will waive a penalty under these circumstances? Some don’t or charge a portion of the penalty, but most will waive it._

    That is just one of many many examples where a broker chooses to do something because of the money that they earn on the deal. ANY broker in Canada who claims that they have NEVER done that… or NEVER WILL do it… liar liar… pants on fire.

    Disclosing income will not resolve these issues, there are other things that can be done. All of that being said, if brokers want to know WHY a regulator would look at making any changes such as this… LOOK IN THE MIRROR.

    And for the record, I do not work for a bank, nor any other lender. I am a broker. I would happily disclose all of my income to my clients – because I have nothing to hide. I also do a lot of top ups and blend and extends every year for my clients. I may not make as much money as some, but I know that I am truly helping my clients. I place them with lenders that are flexible on the penalty, and with the rate environment being what it is, 9 times out of 10 the client is paying the same or a better rate than before.

    Brokers… you want the regulator to start looking at other options? Give them some legitimate options instead of whining about how much the banks make etc. These are not now, nor will they ever be, valid arguments.

  • Suz on 2016-01-28 12:22:49 PM

    Yikes reading back my last post....Sounds a little bitchy, but whatever, this is getting to the point of who is actually protecting us, as respected brokers. We pay the Regulators to be licenced and we conform to the rules and ethics, we word hard for our client's best interests and the regulators present this image of us to the public as a risk !

    One further question after my little ranty, rant above ! Do Realtors have to disclose the 50bps kick back they get from two major banks in Canada when they refer a mortgage directly to the lender?

  • Larry on 2016-01-28 1:26:08 PM

    All good thoughts. One more to add to the mix; FICOM actually DOES have the right to regulate bank activities in BC. Samantha Gale of MBABC can address this fact and I think she will say FICOM is simply afraid to use their right to regulate, even though it exists.

    Beyond that, reciprocity should be required. If mortgage brokers are ultimately required to provide this disclosure, it should only happen at the same time insurance brokers, mutual fund brokers, investment dealers, investment advisors, etc all begin to provide the same level of disclosure.

  • Hasan Merchant on 2016-01-28 3:07:27 PM

    Just adding my 2 cents here…. Walid Hammami is very right in creating awareness in the Mortgage Brokers fraternity in understanding the reason and getting to the root as to “Why FICOM is after mortgage broker's commission disclosure”. FICOM needs to disclose the real reasons behind their actions.” Is it that the Mortgage Brokers fraternity, though large in number is scattered and not a big as the Big 5 (Financial Institutions)

    What I see, Mortgage is one of the many financial products that is been offered by many and most of the financial institutions. There are products which attracts huge commission and never been disclosed to the consumer such as products offered by the Investors Group, Edward Jones, Insurance Companies and even Banking industry. Are all these financial products offered to the end consumers by this gigantic financial industry been monitored and do they disclose their percentage of commission that they benefit on the sale of such a product…. If not then, why the brokers are been targeted by FICOM. Is it that they have a strong lobbyist who are elaborately supported by the Big 5 and other Giants in the Financial Industry and are bent to curb or rather say Gulp the small fish in the pond so as to enlarge their coffer….

  • Victor Simone on 2016-01-28 4:55:39 PM

    FICOM is not listening. All the stakeholders can sense this is a fait accompli, and all this letter writing is really only meant to pad the FICOM files on their decision.

    Am I wrong ?, because I can't understand what it is this decision will do to protect the borrowers in the Independent Arena.

    One would think FICOM would go after the low hanging fruit like "Mandatory E & O Insurance in BC." Instead they impose an unfair disclosure that only affects 35% of the marketplace, and the other 65% is laughing all the way to the bank......heck, they are the bank.

  • James on 2016-01-28 4:58:17 PM

    Does FICOM have any empirical data to show X amount of clients were "hurt" and would have benefited from the proposed added disclosure?


    If anything, this is just another self serving attempt to justify their perceived advocacy on behalf of the consumer.

    The biggest threat to a consumers' financial well being right now are in credit cards and the lack of transparency in the prepayment penalties. However, do we see OFSI making a stink about it? O wait...reps are not even licensed!

  • Ron Butler on 2016-01-28 5:00:27 PM

    Transparency is what I would want on any transaction I enter into. I would prefer to know what the car salesman made, what the Life Insurance agent made, what the P & C broker made, Why not?

    If the consumer is the reason the income occurred in the first place why not let the consumer know what the income is? Let's face it, although the lender pays us the consumer is the ultimate source of the income so why not have the consumer fully informed?

  • Victor Simone on 2016-01-28 5:01:03 PM

    Mr. Cashin : I applaud your remarks, and wish I had your talents to belittle stupidity. My special congratulations on your closing summary. "stupid idea" factory....

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