Broker not threatened by big bank incentive

by |
Brokers may view RBC’s newly-minted mortgage incentive program – that offers realtors a bonus for referring first-time home buyers -- as a sign that the broker channel has the bank worried about market share.

“I think they’re just fighting back because we’ve taken a big chunk of their portfolio,” Harold Grant of Dominion Lending Centres Ridgeway Group told MortgageBrokerNews.ca. “They don’t support the broker channel and I don’t think it’s a bad thing because they’re feeling the need to fight back.

“That’s capitalism.”

Canada’s biggest bank – and the country’s largest mortgage lender -- is now offering real estate agents $1,000 for every five first-time homebuyer referred to an RBC specialist.

It’s a segment that has become increasingly competitive following several rule changes that have made it more difficult for first-time buyers to break into the market.

“If you think about the context of the broad market, and slowing mortgage growth, understanding where there are pockets of opportunity is really important for our business,” Erica Nielsen, vice-president of home equity financing at RBC told the Globe and Mail. “The first-time home buyer is an opportunity for us.”

The program is set to run from May 1 until September 30 and is part of a comprehensive rewards program. Real estate agents can also collect points for referrals that can be redeemed for plane tickets, gift cards and merchandise, according to the Globe and Mail.

The bank requires realtor participants to sign an agreement stating they will disclose the details of the promotion to clients.

RBC isn’t the first bank to offer a referral bonus to realtors who drive mortgage business through the door.

National Bank offered a similar incentive to realtors in 2011 by offering 50-basis point referral fee for sending mortgage seeking clients to a branch.
 
  • Barb on 2014-05-28 11:08:55 AM

    other lenders have paid realtors but I believe this is the first time its for "First Time Home Buyers" only. No coincidence that this demographic is the highest percentage of clients using mortgage brokers.

  • Heffee on 2014-05-28 11:22:30 AM

    I've had several clients come to me recently, after having been to RBC. It's taking RBC 3 weeks to turn around a preapproval. $1000 isn't much good to an agent if the financing never gets done.

  • John on 2014-05-28 11:27:11 AM

    TD Canada Trust has been giving referral fees to Minto sales people for years.When you accept a referral fee you are putting your ethics into question. Are you recommending someone because they will provide a good service to your client or are you recommending then for the referral fee. Would you recommend that person, if you did not receive a referral fee. In the securities industry, such practices are forbidden. It is forbidden for Mortgage Broker’s to give referral fees to unlicensed individuals. Employees at banks do not have to have a licence to sell mortgages, so there is no regulatory body to put into question the ethics of referral fees. It is time to stop such practices. In the service industry reputation and ethics is of most importance.

  • Eric on 2014-05-28 11:38:53 AM

    Dont worry the Banks will never take too much business from mortgage brokers because they dont fudge NOAs and other documents to get people approved.

  • Jack on 2014-05-28 11:52:13 AM

    if they are offering $1000 as a Referral - why don't they just get into the broker channel. After all - when you include the additional time that will be required to complete a file at underwriting/branch/etc - discard all the deals that don't work - aren't they are almost there? At least that way, the work is done by the brokers & send what actually fits.
    But they are too stubborn & will stick to their guns...NO BROKERS...sadly - their people are not treated very well either & so many leave or are dismissed because of unrealistic targets. All in an effort to screw the employees, the consumer & make BIG MONEY for the BIG BANK

  • Okanagan Broker on 2014-05-28 11:57:26 AM

    This is still just soo wrong...if a realtor wants to take advantage of this, or any such offer it simply isn't in the client's best interest! As brokers we will likely have better rates and products than the RBC will offer to clients under this program...Any realtor taking advantage of this should be ashamed for not doing what is in the clients best interest!

  • Keith on 2014-05-28 11:59:45 AM

    @John "When you accept a referral fee you are putting your ethics into question."

    Brokers are paid this way all the time... Finders fees, commissions, referral fees - at the end of the day they are all the same. Throw into the mix that brokers get paid more money if they send more volume... well that is incentive for brokers to send deals where they get paid the most money. Not what is best for the client.

    Brokers argue that they would never do that, but they do - all the time. Minimum volume requirements, volume bonuses, points programs - these are all incentive programs to send business to a particular lender.

    So how is that different than the lender paying a realtor a referral fee?

    Pot... meet kettle.

  • John Bargis on 2014-05-28 12:02:20 PM

    Eric -

    It's not hard to determine that you're very new to the mortgage industry with the ignorant, naive, and quite frankly stupid comment you made about the mortgage broker industry. Fraud exists in all channels, including the bank, and to state that the mortgage broker industry is built on fraud, is simply a ridiculous notion.

    It's cowards like you who choose not to identify oneself that create misrepresentations to the public, as a result of your incompetence to compete with a professional industry that supports the banks with the huge volume it generates for those who choose to engage it.

    The consumer is the measuring stick for the broker industry my friend, and the significant growth of the industry is a clear indication of the value we provide in the eyes of the consumer.

    Competition is healthy. My advice to you is learn quickly how to participate on a professional level.

  • Janice Moran on 2014-05-28 12:06:19 PM

    I would not worry about this program as most of the RBC branch people have to sell all of the products and are not particulary competent in the mortgage area...

  • Lior, Mortgage Edge on 2014-05-28 12:39:41 PM

    At the end of the day real estate professionals are not looking to get paid $200 on a referral and a gift card to Home Depot through the RBC rewards program. What they are looking for are referrals and additional business where they can earn a commission. What they are looking for is a partner who can help them not only close their existing deals but provide them with additional business through their own professional network. That is something that the banks and their sales force cannot offer on a consistent level. In fact, I find it hilarious that RBC is paying the referring party only $200 per closed deal. RBC is the largest bank in the country and they just reported over $2 billion in profit last quarter. A real estate professional deserves more than 200 bucks for a deal where RBC will generate substantial income from the interest portion of the loan right from the onset. This type of referral arrangement is truly for the most novice real estate agents who have no professional network.

  • Anthony C. on 2014-05-28 12:46:16 PM

    @John

    Your comment on Referral Fees restricted to "licensed" persons is incorrect....as a licensed mortgage brokerage/broker/agent, we can pay a referral fee to "any" referring party, regardless of their profession or designation...we however must disclose that the deal was referred to us, in addition as to whether the referring party is/is not being paid a referral fee, in the appropriate section of the Disclosure to Borrower statement.

    @Eric

    Were you being sarcastic with your statement or do you actually believe that fraud does not exist in the banking industry...

    If the former is correct, I like your sense of humor...if the latter, the statement leans towards naivete...its not too much of a task to research and find dozens of media-covered fraud cases/charges/convictions related to mortgage fraud, perpetrated via bank and mortgage broker channels...

    @John Bargis

    Its vacation time John...:)

  • Vinnie Boombots on 2014-05-28 1:17:27 PM

    All you have to do is read the MBLLA Act in Ontario.
    What RBC is doing is called "A simple referral" & is quite legal IF the realtor discloses in writing on OREA Form 610 "Disclosure of Benefit/Payment to Registrant".
    If the realtor does not disclose then they may be in breech of their representation agreement and may be putting their full commission at risk as well as being subject to RECO disciplinary action.
    And if the truth be know there are hundreds of mortgage brokerages offering some "benefit" to realtors for mortgage referrals.

    Lets not get too high & mighty

  • AnthonyC. on 2014-05-28 1:35:18 PM

    @ Vinnie

    Yo, Vinnie....! Its MBLAA...not MBLLA...fugeddaboudit!

  • Paul Mangion on 2014-05-28 1:40:25 PM

    At the end of the day it will have to be disclosed to the client and I don't know too many successful realtors that would want there client to know about the kick back unless they were forwarding the kick back, back to the client. The realtors that will flock to this don't do any serious volume so it will only affect the mortgage agents that have crappy limited referrals anyways that get very little serious business.

  • Jason on 2014-05-28 1:54:20 PM

    RBC may not have a direct broker channel but if you've ever sold a client a mortgage that involved Paradigm Quest then you used RBC money. RBC is a huge broker channel funder. They don't let brokers anywhere near the RBC brand.

    As for referral fees paid to realtors, yes it smells of conflict of interest and should be disclosed to clients. As for whether it hurts a broker's business, surely you can build a relationship with realtors that is built on trust and mutual business support, not $200.

  • Liz on 2014-05-28 1:59:21 PM

    Eric, your comments do not even deserve a response. I agree with Johnny B.
    My concern which Paul has addressed is, are the realtors disclosing this cash incentive to their clients and are there clients getting the best option for themselves or the realtor. Stick to one thing and do it well.

  • Vinnie Boombots on 2014-05-28 1:59:57 PM

    Yo AnthonyC.

    My fingas stutta.

    VB

    To Paul M & Lior
    Right on the money...What kind of "shooter" in real estate is going to put a real estate commission at risk for $200?

    The banks are probably very safe with this program. A recent survey shows that less than 15% of realtors in Canada sell more than 6 properties a year, and a realtor needs to refer 5 first-time buyers to get the $1,000.00.
    So if RBC gets every newbie realtor to refer one first time home-buyer, RBC puts lots of new business on the books but doesn't have to payout a penny!
    Isn't this a great country to be a banker?

  • Frank on 2014-05-28 3:39:24 PM

    So is RBC cutting the throats of their own mortgage sales force? The deal with the realtors says for referrals to a branch, not an RBC specialist. Must be nice as a 100% commissioned bank employee to know your bank is now competing against you.

  • Rosanna on 2014-05-28 5:20:31 PM

    Eric, I did work for the banks, and when it comes to fudging documents i would say the bank is a leader to that

    as a mortgage agent under the strict regulations we have i do not see any bad behavior. I hope you are not an agent

  • Michael A. on 2014-05-28 7:09:40 PM

    Just to clarify, the $1000 offer is made for referrals to Mortgage Specialists/not branches as mentioned above. The article in the Globe and Mail published today includes a copy of the ad which is sent to realtors.
    The bigger issue is that the $1000 offer is in addition to the referral points program which can be more lucrative and which realtors should also disclose in their documents to their clients. CAAMP and the provincial broker associations should bring this up to the regulatory bodies as the realtor referral points programs are rarely mentioned in realtor disclosure forms. Regulation around these programs is not as strong as it could be. Points are harder to track and quantify as opposed to a cash payment and can be cashed in anytime down the road for either money or an object. The Banks can honestly say that they advise the realtors to disclose the points accrued for the referral, throwing the onus back on the realtor.
    If there were no point programs, there would be greater transparency in the referral process and programs out there.

  • Vinnie Boombots on 2014-05-28 8:14:04 PM

    To Michael A
    We don't need more regulations/laws, just enforcement of existing regulations & laws.

    The Criminal Code of Canada is quite clear about the result of non-disclosure of any benefit( points/money/cell phone minutes/etc.). Interpret the Agent as being the realtor/real estate brokerage, the Principal being the client of the realtor/brokerage, and the Payer as the bank.

    Maybe RCMP Commercial Crime division, Ministry of Finance or OSFI should have a look at this section of the Criminal Code of Canada as it relates to any undisclosed bank payments.
    Banks CANNOT dump responsibility on the Realtor & walk away- paying a benefit/secret commission is no different than receiving a benefit/secret commission. Here is the section of the CCC
    SECRET COMMISSIONS
    Marginal note:Secret commissions
    426. (1) Every one commits an offence who
    o (a) directly or indirectly, corruptly gives, offers or agrees to give or offer to an agent or to anyone for the benefit of the agent — or, being an agent, directly or indirectly, corruptly demands, accepts or offers or agrees to accept from any person, for themselves or another person — any reward, advantage or benefit of any kind as consideration for doing or not doing, or for having done or not done, any act relating to the affairs or business of the agent’s principal, or for showing or not showing favour or disfavour to any person with relation to the affairs or business of the agent’s principal; or
    o (b) with intent to deceive a principal, gives to an agent of that principal, or, being an agent, uses with intent to deceive his principal, a receipt, an account or other writing
     (i) in which the principal has an interest,
     (ii) that contains any statement that is false or erroneous or defective in any material particular, and
     (iii) that is intended to mislead the principal.
    Marginal note:Privity to offence
    (2) Every one commits an offence who is knowingly privy to the commission of an offence under subsection (1).
    Marginal note:Punishment
    (3) A person who commits an offence under this section is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years.
    Definition of “agent” and “principal”
    (4) In this section, “agent” includes an employee, and “principal” includes an employer.
    R.S., 1985, c. C-46, s. 426;

  • Vinnie Boombots on 2014-05-28 8:14:06 PM

    To Michael A
    We don't need more regulations/laws, just enforcement of existing regulations & laws.

    The Criminal Code of Canada is quite clear about the result of non-disclosure of any benefit( points/money/cell phone minutes/etc.). Interpret the Agent as being the realtor/real estate brokerage, the Principal being the client of the realtor/brokerage, and the Payer as the bank.

    Maybe RCMP Commercial Crime division, Ministry of Finance or OSFI should have a look at this section of the Criminal Code of Canada as it relates to any undisclosed bank payments.
    Banks CANNOT dump responsibility on the Realtor & walk away- paying a benefit/secret commission is no different than receiving a benefit/secret commission. Here is the section of the CCC
    SECRET COMMISSIONS
    Marginal note:Secret commissions
    426. (1) Every one commits an offence who
    o (a) directly or indirectly, corruptly gives, offers or agrees to give or offer to an agent or to anyone for the benefit of the agent — or, being an agent, directly or indirectly, corruptly demands, accepts or offers or agrees to accept from any person, for themselves or another person — any reward, advantage or benefit of any kind as consideration for doing or not doing, or for having done or not done, any act relating to the affairs or business of the agent’s principal, or for showing or not showing favour or disfavour to any person with relation to the affairs or business of the agent’s principal; or
    o (b) with intent to deceive a principal, gives to an agent of that principal, or, being an agent, uses with intent to deceive his principal, a receipt, an account or other writing
     (i) in which the principal has an interest,
     (ii) that contains any statement that is false or erroneous or defective in any material particular, and
     (iii) that is intended to mislead the principal.
    Marginal note:Privity to offence
    (2) Every one commits an offence who is knowingly privy to the commission of an offence under subsection (1).
    Marginal note:Punishment
    (3) A person who commits an offence under this section is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years.
    Definition of “agent” and “principal”
    (4) In this section, “agent” includes an employee, and “principal” includes an employer.
    R.S., 1985, c. C-46, s. 426;

  • Poor Mortgage Guy on 2014-06-02 12:33:51 AM

    As a realtor, the most important thing is to make sure the client can get mortgage, not referral fee.

    5 first time buyers for $1,000, I am willing to pay 2x, 3x or 4x to get the business.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions