Broker vs. road rep: same deal, same lender, different outcomes

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An Alberta broker is frustrated by what he calls a disturbing trend: banks in the broker channel turning down his deals only to then fund those same deals through a road rep.

“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 “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.”

All three were A deals, although 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 was working with a realtor on the deals, so I know where they went and who then submitted them,” he said. “I understand why they weren’t funded, but I don’t understand why they could then be funded when submitted by a mobile specialist.”

The concerns add a new twist to the continuing rate wars, with banks on one side and brokers on the other.

While brokers have routinely pointed to discrepancies between the rates they access through some banks using the broker channel versus special discounts their branch personnel and road reps tap into, Bagga’s fears add a new dimension to industry concerns around fair competition.

It also comes as the big banks ramp up recruitment efforts, looking to bolster their mortgage sales teams ahead of the busy spring season.

RBC, alone, took on 1,000 new sales employees in the last 14 months – a large percentage of them mortgage specialists and five times as many as it took on the previous year. And, BMO, which left the channel in 2007, added 1,000 frontline workers of its own in the second quarter of fiscal 2011. They helped drive sales, with the bank bumping up the value of its residential mortgages by $2 billion, year-over-year.

Bank want ads calling for those specialists now crowd online headhunting sites, among them positions at the four Big Six using brokers to originate mortgages.

Bagga is still prepared to send deals to the banks, if, in fact, it’s in the client’s best interest, although wants to see underwriters at those institutions employ the same kind of flexibility with broker deals as they do with mortgage specialists.

“It must be fair,” he said.

  • AB Broker on 2011-11-08 5:23:28 AM

    The biggest question you need to ask yourself Rohit is why on earth you sent those deals to the bank in the first place. There are non-bank lenders within the broker channel that fund those types of deals, and even some broker channel subsiduary bank lenders. If your're foolish enough to feed the banks business, you almost deserve what you got. Anyone thinking that there can be cooperation between brokers and the banks, and that the banks will play fair and uphold their end of the bargain are sadly mistaken. Those at the top at Invis made a decission to be in bed with the banks out of their own personal greed, and now their frontline brokers are paying for it. How many wake up calls do some of you really need before you stop contributing to the same banks bottom lines that are trying to put us out of business.

  • Anonymous on 2011-11-08 5:24:32 AM

    I agree what is going on when the Brokers under the same lenders have special privileges. When it comes right down to it, I will point out the the lender at the onset of a deal when I do know the clients were given approvals by either a local branch or lenders Mobile specialist. Word gets around. One of the other issues I feel is frustrating is knowing that a direct lender can simply pull a few strings for a free bee as you will say and have the insurer approve a deal for a client, when in fact they do not fit any of the insurers guidelines. I am going through one rignt now and I am determined to request the other clients Insurer # to compare and prove what has really gone on here. It is rather embarrasing when the Broker is turned down by the lenders insurer, yet you dig deep enough to find out another lender/Branch deal is approved by that same insurer, simply because of favourtism.

  • John Dearin on 2011-11-08 5:24:37 AM

    It is simple how they do it, they fix the file and the documents to make it work. You won't do this, I won't do this so the deal goes to the branch. And they are under the gun and the hammer, and the knife to produce. they close thier eyes to what is being submitted.

    I have the documents here on one such deal that went to RBC...we let CMHC know what was on the go, but we heard nothing back...they are not even going to review the file. The banks TELL CMHC and I supose GENWORTH how things work, not the other way around.

  • Ontario Broker on 2011-11-08 5:35:22 AM

    Great question. Why are you supporting the banks in the first place? Shooting yourself in the foot. Hopefully brokers will start to smarten up about this.

  • Julia Krause on 2011-11-08 5:40:02 AM

    Individual bank branches each have their own quotas/targets/goals that they have to reach. Individual branches are concerned only with their own book of business. They probably aren't even aware that 'broker centre' turned down the deal, and they wouldn't care anyway. If they want the deal, they'll find a way to do it. Is it fair? No. But brokers need to be aware that it happens, and it's been happening for a long time. Educate your clients on what the big banks are really all about! And support the lenders who support mortgage brokers!

  • Ottawa Broker on 2011-11-08 5:40:26 AM

    Deal with the banks, die by the banks. No sympathy from me. The monoline lenders can do everything a bank can do, just need to know your products and your lenders. I am not the largest broker, but I do ok. I have 98 funded deals year to date and only 2 have gone to on of the banks. Both were to save the client a significant IRD. It is very easy to survive without the banks, so stop using them. I am getting sick and tired of listening to the whining about the banks, stop using them.

  • BC Broker on 2011-11-08 6:56:57 AM

    I've heard that RBC has never made a claim to CMHC for a failed mortgage. CMHC/GE will give favours to the Big Banks because they know that if the file isn't perfect when a claim is needed to be made the bank will eat the losses. Monoline's pockets aren't deep enough. There is nothing new here.. it's just happening more often with more specialists and a shrinking mortgage pie.

  • BC Broker - with ethics on 2011-11-08 12:20:33 PM

    Every broker who suspects Fraud should report it to CMHC and Genworth and AIG

    If enough of us (licensed brokers or licensed Agents) sent the property details and or clients names to the email addresses above.
    Reporting Suspected Fraud or actual FRAUD will start to address this situation. These reports will stand as evidence of potential (or actual) abuse.

    Next step ask the regulators to review these warnings of Fraud and see how many were funded.

    Big banks can pay off (use lobbyists) to influence the policy that would limit this type of practice.

  • @GTAMortgageNews on 2011-11-09 1:39:38 AM

    I have had several deals that monolines submitted to CMHC for refinances where the values we were seeking were turned down. The clients then went in to their branch and were immediately approved by CMHC. Misrepresenting any of the values to Emili can cause this to happen and is pretty easy to do should a branch be hungry enough to retain or obtain a client. I Spoke to CMHC after this happened the first time and they shrugged it off.

    To come full circle, why send deals to banks ever if you dont absolutely have to? Especially if your first 2 deals as this article suggested were turned down and done internally! I would never use them again let alone again that month...

  • MontrealBroker on 2011-11-09 3:30:41 PM

    New condo constructions. Several Projects all over the Montreal. Different builders, same main player : La Société d'habitation et de développement de Montréal.
    To my surprise, CMHC turned down every deal I sent through BROKER CHANEL (lender/bank does not matter here)– due to the important issue: THESE CONDO PROJECTS ARE NOT BUILT ACCORDING TO THE CMHC STANDARDS.

    I kept my eye on the project(S) and the condos being financed there, and a closer eye on the lender(s) financing the condos. And what I found out was that the same condos have been financed at the banks’ branches and approved by CMHC.

    I made the effort and verified through my contact, why the condos (built not according to the CMHC standards) are getting insured by same CMHC???!!! And here what I got in response: “we had a computer glitch and approved it by error.” Then I reported another transaction – same answer from CMHC rep…then 3rd transaction – same answer…

  • Ian Murray, AMP on 2011-11-10 5:02:29 AM

    I certainly can sympathize with Mr. Bagga's frustration. Most mortgage professionals, who have been around for a while, have experienced this.

    I have several thoughts and comments:
    - Bank/Lender reps should have to be licensed just as Mortgage Brokers have to be. In many cases, they are not. This would also suggest the educational and experience requirements could be held to a different standard. Ultimately, is the consumer getting the best advice and even the best product?
    - A deal sent in by one party may be rejected and approved by the same lender when sent in by a different party. If could have been presented differently and in many cases it is. Most of us have had a client come to us, "frustrated" in dealing with someone else and when we look at the details, we know how to get it done. This is mostly experience, exposure and a long list of available lenders who offer different product lines and have different underwriting rules. A case in point would be in dealing with a discharged bankrupt. Some lenders won't even look at the deal while others have reasonable policies and procedures to get the deal done.
    - there are cases where lender "A" will decline the mortgage broker's submission and yet approve it for a branch rep AND IT WAS PRESENTED THE SAME WAY. This has happened, to me, in the past. I would appeal the decision and back it up with documentation and in the end, get paid. The issue here was in that my reputation was damaged in the eyes of the client. What value does one place on one's reputation?
    - Competition is inevitable. Lenders will legally do whatever they need to gain a larger slice of the pie and to make a profit for their shareholders. Just as they should. Mortgage professionals need to educate consumers to our "value added" proposition. We can not and should not stand on "the best rate". A mortgage is so much more than just the rate. If we want to be held out as professionals, we have to act as professionals. Each time. Every time. All of the time.

    We will win most battles and we will loose some. Pick the "battle" you can win and have fun doing it.

    Or we could all go and work for one of the banks.

    Maybe not.

  • Bob on 2011-11-11 12:22:17 PM

    Instead of complaining about the banks, why not put your head down and work. There are many successful Brokers out there that don;t waste their time making up un-founded stories, wth no emperical data.
    \if you are losing business to the Banks, you may want to look at your service levels, deal structuring and contact management routines.

  • satisfied Broker on 2011-11-15 3:04:47 AM

    go ING DIRECT!

  • Blair Anderson on 2011-11-08 6:49:55 AM

    If you are having trouble selling mono-line bank mortgages, and feel you need the security of a household name bank, learn more about your to your sales support team/manager, talk to a business development manager(s) from any one of the mono-line banks. Your new confidence in what you are selling is all you need to gain the trust of clients.

  • Paul on 2011-11-08 6:54:38 AM

    Truthfully there really is no excuse for a bank do ing a deal through an internal if they won't do it through an indpendent. But, without each person who reads this being able to look at the repsective applications, etc. It's impossible to judge the situation fairly. Regardless... the bank reps are competing for the business, suck it up, competition is the name of the game, and it is in truth healthy to have. Life is not fair, business is about as unfair as it can get. There is a reality out there that brokers tend to overlook or maybe they are just not aware of it. The banks in Canada are responsible for the vast majority of the money the monoline lenders receive to lend out. So... let's think about it. The banks are sucking up their own branded mortgage volume through hiring road warriors... but they still funnel billions of dollars into the monoline channel through their investment divisions... so they obviously still support the broker community... yet... brokers still insist on fighting for bank branded deals where there is greater competition... even though there are lenders out there that are exculsivly dedicated to the independent broker channel... Of course there is the excuse that the consumer wants only to deal with the bank... but we know that is not true because there are thousands of brokers who never send a single deal to the big banks... it all boils down to choice. (1) How we choose to run our business - namely on the strength of a bank brand or the strength of what the independent broker can offer. (2) Where we choose to place our business - a lender that is going to publicly compete and will scoop us at the first opportunity, or a lender that is dedicated to our business and success. (3) Stop complaining about the business and how the banks don't support us, about how unfair life is and suck it up and do something about it - or keep on the same path and watch your business crumble around you.

  • AB Broker on 2011-11-08 6:56:32 AM

    Unfortunately these things don't catch up to the banks significantly enough. Even with the banks being investigated by OSFI and potentially others I doubt much will come of this. The insurers basically won't do anything even when they have been clearly presented with evidence that they have been defrauded on a bank deal. Also, OSFI actually had enough evidence on a Big Six bank a couple of years ago to temporarily shut down and conduct a search at their head office. For whatever reason, I'm fairly sure no charges were laid or fines imposed. My guess is that federal prosecutors and or the federal government simply refused to go after them. Basically the banks feel pretty comfortable that they can get away with just about anything, and will most likely continue to do so.

  • An experienced banker and broker on 2011-11-08 6:14:36 AM

    Hey, I hope these comments make it past the mediator as I think they can help many to understand the history... this is just cyclical... This has been happening for almost 15 years... Just doesn't get enough exposure... and it's probably going to happen a lot more with all these new 'Mortgage Specialist's out in the field... Ever since the Banks decided it was better to hire internal Mortgage Specialists vs dealing with independent Mortgage Brokers.... As one of the original Mortgage Specialists in the early '90s, I saw how the introduction of commission challenged their some people's moral beliefs and created fraudulent mortgage transactions on a regular basis. Yes, fraudulent... it's a strong word but it's the appropriate term. The opportunity to earn $100k, $200k, $300k and more, was too much for many to handle. Remember, Banks don't like to go public with internal fraud..... it's bad for their credibility...... Each Bank has had their share of fraud committed by Mortgage Specialists.... doctored income and down payment documents... I'll bet if you look at any of the Top Ten producers at any Bank and you'll find questionable mortgage files.... It's just a fact of the industry. Today, I'm a veteran Mortgage Broker in the GTA.. I'm concerned about losing mortgage approvals to these 'Specialists' when I submit an application with all the facts... knowing the had to have changed some details in order to obtain the same approval... Let's ask some questions... How come we haven't seen a huge increase in reported fraud by Mortgage Brokers? After all, this would be reported by FSCO.... Maybe brokers aren't so bad after all... or maybe we are held accountable and have a license to lose...unlike Bank Mortgage Specialists that are not regulated and have nothing to lose. Here's only a few of my most recent experiences from the past few months , I have had this happen to me also. 3 times in the past few months... 1. A bartender bought a home with 20% down... showed only $14k on her T4s. had good credit but not enough income. The mortgage was funded through RBC...hows?? 2. A realtor wanted to buy a rental property with 20% down... she had a big line of credit on her principal residence...didn't show enough income.... well, somehow, the RBC mortgage specialist gave her a secured of credit on this rental property... 3. Another mortgage specialist was telling a buyer to add himself to title with the seller, enter into a side agreement to protect the seller, then get an appraisal (house was listed at $1.5m and they wanted to appraise for $2m), refinance through the bank, get an appraisal done for $2m (I'm not sure who the appraiser is that could support such a value), and then apply for refi at the bank, remove the seller from title, avoid paying Land Transfer Tax and finance the home for 75% of appraised value.. effectively, buying with $0 money down and avoiding Land Transfer Tax.... These are the so-called 'Mortgage Specialists' that banks has hired... These are just a few of the experiences I have had.. I'm sure there are hundreds more... where are the regulators ?? The only good news is that this sort of stuff catches up with the Banks.. it always does.. and when it does, they will monitor things much more closely... tighten their lending practices for a few years and then loosen the underwriting guidelines... it's cyclical... but it still sucks and it's unfair..

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