Broker: We’ve gained market share, not lost it!

Broker: We’ve gained market share, not lost it!

Broker: We’ve gained market share, not lost it!
Buck up, brokers. By one industry veteran’s calculations, the channel has actually gained – not lost – key market share in the difficult years following the subprime collapse.
 
“We’ve all seen and heard a lot of handwringing and lamenting about the loss of broker market share,” David Larock, president of TMG The Mortgage Group Integrated Mortgage Planners in Toronto, told MortgageBrokerNews.ca. “But is that the case? By my calculations, if the subprime market was six to seven per cent of the overall mortgage market before the credit crunch in 2007 – almost all of that broker market share – then we should have lost a corresponding amount of our market since that time. That just hasn’t happened, which means we have largely replaced the lost subprime portion of our business with new prime business, even in the face of increased competition from the major banks.”
 
The analysis flies in the face of growing concern about the future of the industry and a new report from CAAMP suggesting market share for mortgage professionals has actually slipped since 2010.
 
Larock is painting a very different picture, contrasting CAAMP’s most recent survey results with those from 2007, just prior to the global credit crunch and the decimation of Canada’s subprime market.
 
In 2007’s poll, CAAMP found 25 per cent of new mortgages that year were obtained through a broker, just two percentage points lower than the 27 per cent who did so in the 12 months ending this April.
 
The earlier 2007 figure is particularly interesting, said Larock, in that it provides a snapshot of the market just before the collapse of subprime lending – a segment of the market once dominated by brokers, and largely ignored by the big banks.
 
Ostensibly, broker market share fell by as much as seven per cent in the weeks following the meltdown. But fast forward to 2011, and the broker channel now controls 27 per cent of the new mortgage market. It suggests brokers have been able to grow prime-market originations to “more than compensate for that loss of subprime mortgages,” said Larock, who worked in the alternative lending sphere for more than a decade. “Far from losing ground, we’ve recovered more market share than we’ve lost.”
 
His calculations are meant to answer critics – in and outside the industry – who charge the broker channel has increasingly failed to fend off competition from the Big Five, as they enlarge their collective sales force and expand marketing campaigns and mortgage products to grow portfolios.
 
“Of course if you carpet bomb the market with sales people you would expect the banks to increase their market share,” Larock told MortgageBrokerNews.ca. “But some critics have created the perception that because of that we, as brokers, represent a weakening segment of the market and are using a flawed model. The numbers just don’t support that.”
3 Comments
  • AlwaysintheGame 2011-05-19 3:14:04 AM
    it would be interesting to compare the 25 % and 275 in terms of actual number of deals. That way it would be more effective. 25% of what number and is that a greater number than 27% of y?
    As an agent in the industry it will be interesting to see how that numbers grows and we try to hit the 40 % mark.
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  • Wane Davis 2011-05-19 4:13:01 AM
    The perspective shouldn't be a quick year over year comparing 2010 to 2011...take a look at the trend over the last 6 years...and the trend in growth of brokers/agents vs. lender mobile mortgage reps...then do the math...sub-prime or no sub-prime...the industry once was closing in on 40% and it isn't getting closer anymore...
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  • Elfie Hayes 2011-05-20 6:56:39 AM
    Thank you for the article Vernon. I do like to look on the bright side of things where-ever possible!
    What I have been doing in my own mortgage practice is looking at how my office is doing. I joined MI in November of 2007, brought on 2 full time licensed agents and today May 2011, I have 7 people on my team and my volumes doubled during this recession. I like knowing that our industry is not losing market share, but the only thing that matters to me in the end is what is my team is doing. You can have a solid footing as an industry and still individuals fail to produce. Through hard work and relationship building we have replaced the Sub-Prime business with more A deals from repeat and referral business, but we've also aligned ourselves with Lenders both institutional and Private so we can do all the Sub-Prime business that the Big 5 can't seem to pull together. Experienced Brokers can keep gaining market share even when the industry is not doing the same. Once again thank you for your article, it gave me a boost after reading that Brokers were falling behind!
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