Broker: We've earned renewal fees from Scotia, TD

by |

It may be the broker equivalent of, “If you can’t beat ‘em, join ‘em.” But an industry veteran studying the channel’s growing use of the big banks says brokers have now earned renewal fees from those lenders.

“I don’t know what they’ll do or won’t do,” David Hetti, an Invis agent in Oshawa, told, “but if the banks that use the broker channel are willing to talk about it and do move to offer renewal fees of even 15 basis points that will strengthen their relationships in the broker channel, where the mono-lines already benefit from higher broker loyalty.”

The suggestion is a tacit acknowledgement of the strong pulling power both Scotia and TD exert on brokers. It’s a more overt acknowledgement of the strong client retention those lenders already enjoy at renewal, whether the borrower comes by way of the broker channel or the branch. Brokers are generally cut out of that equation, something a 15-bps renewal fee would change.

“It would also encourage brokers to work with the banks at renewal instead of against them,” said Hetti. “It would also reward us for bringing in that business initially.”

The cooperative approach is something several mono-lines have already adopted, with others moving to introduce trailer fee options for their brokers. The model Hetti is proposing represents a slight departure, although it also hinges on brokers staying in close communication with clients both before and during renewal time.

There may, in fact, be growing incentive for banks to cooperate with brokers, as those mortgage professionals increasingly look to switches – both at and between renewals – to lift sagging bottom lines. In offering renewals Scotia and TD would reduce broker attempts to move clients to other lenders, in the process minimizing the competitive forces that mandate lower interest rates.

Renewal fees would also acknowledge the very real helping hand brokers are now extending to their Big Two as home purchases across much of the country slow.

Brokers – specifically, a bigger piece of their action – helped cushion the blow for Scotiabank in its third quarter even as its overall market share fell.

“If they (Scotia) were smart, they would look at expanding their efforts to grow business through the broker channel as a more cost-effective way of originating mortgages,” said Della Dwyer, another Invis mortgage professional, in Barrie. “I don’t know that they’ll do it, though.”

For the three months ended June 30, Scotia reported an impressive $2.5 billion growth in funding volume of residential mortgages, relative to the year-ago period, while its overall market share fell from 20.40 per cent in Q2 2010 to this year’s 20.30 per cent.

It suffered an even bigger slide in the last six months, having reached a 20.54 high in the first quarter of this year. Percentage gains and losses of even one basis point represent hundreds of millions of dollars for lenders prepared to undercut each other’s discounted rates in order to meet year-end targets, says analysts. That may help to put erosion of Scotia’s residential mortgage portfolio in perspective. The slip would, in fact, have been steeper were it not for brokers.

Scotia was the broker channel’s No. 1 lender by volume for the quarter ended June 30, moving up from second position, according a quarterly report from D+H. While a slowing real estate market clipped away at its originations even through mortgage professionals, the decline was less than those sustained by most other lenders using brokers to bring in business.

  • Dennis Rajewski Mortgage Broker AMP Mortgage Archi on 2011-09-23 7:15:56 AM

    Banks paying a trailer fee.... Let's look at how the banks work. First, they lend the money at discounted rates to get the cliet in. Then at renewal, they offer the client posted rates. If we are to believe statistics, 80% of clients renew with posted rates. Will you as a broker advise your client to renew at posted rates? Is that ethical? And for this you will get 15 basis points? Isn't this the perception the public has of us? Why not work with the monolines who always have better renewal rates? Why not keep in touch with your clients and be honest with them? Tell them if they are getting a good deal and if their lender won't budge on the rate, work with them to get that better deal. This, in my opinion, is better then holding your breath waiting for the banks to pay you a trailer fee. 5.39% for 5 years V 3.39% Which would you offer for 15 or 100 basis points? No contest, as I see it.

  • E on 2011-09-23 8:06:14 AM

    Agreed, Dennis. Our job is to counsel the client on what are their best option at the time of renewal. These agents should perhaps consider becoming mobile mortgage specialists... if you can't beat them join them right?
    Although, i'm amazed that given low margins you would think that more lenders would embrace a trailer fee model and pay the agent as long as the deal is on the books on a declining scale. This would help build loyalty and strengthen relationships while giving agents a book of business thats worth something. We have to focus on delivering added value to the client and continue earning their business not sit back in our chairs waiting for the lender to throw more money at us... besides i think those days are coming close to an end anyways.

  • Steven B on 2011-09-23 10:15:08 AM

    I know I would send more business their way if they had renewal fees. I have moved most of my book over to monoline lenders that are willing to work with me in the future to maintain my client relationship.....and not steal it. I would like a win/win with the big boys but they want the deal and then want to push us aside and away.

  • Angela Wong-Liao, Invis Inc on 2011-09-23 10:50:52 AM

    I am a big fan of Scotiabank because I have invested 28 years of my financing life with them prior to becoming a mortgage professional in 2001. It is my pleasure seeing Scotiabank's growth and improvements over the past 10 years from the bottom of the list to no 1 lender in the mortgage broker channel. I notice that Scotiabank offers competitive pricing to their clients at renewal time and they do not charge a renewal fee. Yes, it is very difficult to switch out a Scotiabank mortgage to another lender at renewal time. I am more successful in refinancing versus switch.

  • Calgary Broker on 2011-09-23 1:54:55 PM

    I just switched an RBC client at renewal. I have the RBC offer renewal statement and it's not posted rate as Dennis alluded to. It is a discounted rate. Though still not as low as 3.39%. However, I know if the branch want to fight it they will match 3.39%.

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